Counties’ hands are tied in proliferation of sweepstakes

When it comes to sweepstakes cafes Macon County has hit a jackpot of sorts, with at least 11 of the electronic gambling joints clustered along U.S. 441 between the Georgia state line and Franklin.

The operations appear for all intents and purposes like pseudo small-scale gambling parlors, where players buy play time at video terminals for a chance at cash winnings. The concentration along the main highway from Georgia seems aimed at capturing players from a state where some of these types of games are illegal. Billboards on the approach from Georgia advertise pots of gold and lucky 777’s awaiting over the state line.

Now county commissioners in Macon want state lawmakers to let them regulate the electronic gambling operations and, in the process, give the county a slice of the winnings.

Towns and cities have been imposing hefty business license fees on the lucrative sweepstakes operations since their advent. But unlike towns and cities, counties currently can’t charge the sweepstakes cafes a licensing fee.

Further fueling a free-for-all, Macon County has no land-use regulations to limit where or how the businesses set up, leaving county leaders high and dry when it comes to say-so over the proliferation of sweepstakes cafes.

The sweepstakes games cropped up in the wake of a state ban on other forms of video gambling. The sweepstakes operators claim their games aren’t gambling — technically players buy “air time” to play sweepstakes — but Macon commissioners beg to differ.

“It is gambling,” Macon County Commissioner Ronnie Beale said flatly. Given that, “I think there should be some types of regulations. Any gambling I’ve known has been either illegal or regulated.”

Jackson County Manager Chuck Wooten agreed some oversight would be nice.

“You don’t even know how many there are, they just pop up all around,” Wooten said. “We’d like to have some way to be able to control them and issue a privilege license just like towns do.”

Beale seemed optimistic that lawmakers would be sympathetic to counties’ wishes to regulate and charge the gambling operations.

Macon County officials plan to meet with their Henderson County counterparts and state representatives to discuss the sweepstakes issue when they travel May 28 to Raleigh for a legislative conference, Beale said. Henderson County got the ball rolling recently by sending a letter to the General Assembly asking lawmakers to consider either a bill that would give counties the authority to charge for business permits and regulate the sweepstakes parlors.

“One of the concerns here is about age limits,” Henderson County Manager Steve Wyeth said. “Do you want teenagers in there gambling? Also, it seems you should be able to regulate the hours of operation.”

Wyeth said Henderson County does have zoning in place, unlike Macon.

“This does allow you to dictate where these businesses go but you still can’t prohibit them,” he said.

Towns across Western North Carolina have been able to impose steep business license fees on the sweepstakes cafes and are making money off these lucrative enterprises operating within their city limits.

Franklin now charges $2,600 per internet café establishment and an additional $1,000 per machine. The town increased its fee from a flat $2,600 after realizing the operations make more than enough to ante up a little more.

Maggie Valley and Canton currently both demand $2,500 for the first four machines and charge $750 for each subsequent machine. Waynesville is looking to charge the same amounts, probably starting July 1.

Sweepstakes owners recently asked Maggie Valley to relax its tough restrictions, and the item will be considered next month by that town’s planning board. Maggie Valley requires 1,000 square feet per machine.

Holding pattern

State lawmakers attempted in 2010 to close the video gambling loophole that allowed sweepstakes and ban this new incarnation as well. But the law ended up in court. A divided state Court of Appeals in March struck down North Carolina’s ban on video sweepstakes games, ruling that the state law was too broad and interfered with the right to free speech. The split decision meant the court case moved to the state Supreme Court. Arguments are scheduled to be heard in September.

Since that Court of Appeals ruling, sweepstakes cafes have mushroomed across Western North Carolina. The state Attorney General’s office has told law enforcement not to shutdown the sweepstakes cafes until a legal decision is rendered.

N.C. Sen. Jim Davis, R-Franklin, said that he does not expect the issue to be taken up during this short session of the General Assembly. Legislative leaders, Davis said, want to see what the Supreme Court decides before tackling the issue.

“But I do think some sort of regulating authority is appropriate,” Davis said.

N.C. Rep. Ray Rapp, D-Mars Hill, shepherded in the original legislation that has since been struck down by the Court of Appeals. Like Davis, Rapp said lawmakers’ intentions are to wait and see what the Supreme Court actually decides.

“I’m very hopeful they will uphold the ban,” Rapp said. If not, “we’ll exercise the nuclear option and ban all sweepstakes. This will take away all those options of trying to cherrypick various games.”

Rapp said that he and other lawmakers have tried to avoid banning all sweepstakes because that also will impact other industries such as Coca Cola’s bottlecaps games and McDonald’s Monopoly. The law, if crafted, will be modeled on one already in place in South Carolina, Rapp said.

“Dealing with this industry has been very challenging — I’ll leave it at that,” Rapp said.